Question

The standard costs and actual costs for factory overhead for the manufacture of 3,000 units of actual production are as follows:

Standard Costs
Fixed overhead (based on 10,000 hours)	3 hours per unit @ $0.70 per hour
Variable overhead	3 hours per unit @ $1.99 per hour
Actual Costs
Total variable cost, $17,900
Total fixed cost, $8,200

The total factory overhead cost variance is

a.$-10 unfavorable

b.$690 unfavorable

c.$1,390 favorable

d.$690 favorable

Answer 1

Variable overhead controllable variance = ($17,900 - [3,000 units * 3 hours * $1.99 per])

Variable overhead controllable variance = ($17,900 - $17,910)

Variable overhead controllable variance = $10 Favorable

Fixed overhead volume variance = (10,000 hours - [3,000 units * 3 hours per unit] * $0.70 per hour)

Fixed overhead volume variance = (10,000 hours - 9,000 hours) * $0.70 per hour

Fixed overhead volume variance = 1,000 hours * $0.70 per hour

Fixed overhead volume variance = $700 Unfavorable

Total factory overhead cost variance = $10 Favorable + $700 Unfavorable

Total factory overhead cost variance = $690 Unfavorable

Therefore, the correct answer is b) $690 Unfavorable.